To Be or Not To Be An Autodialer? That is the TCPA Question

Written by William I. Rothbard on Saturday, October 13th, 2018

In “Telemarketers Celebrate Rare Regulatory Win” (April 2018), I discussed the D.C. Circuit Court of Appeals decision in ACA International v. FCC invalidating key parts of the Federal Communications Commission’s (“FCC”) 2015 Omnibus Order interpreting certain provisions of the Telephone Consumer Protection Act (“TCPA”), the federal statute governing telemarketing calls and texts using an Automatic Telephone Dialing System, or ATDS. The aspect of the decision having potentially the greatest impact on the TCPA as a telemarketing enforcement tool was its voiding of the FCC’s interpretation of the statute’s definition of ATDS. As discussed below, since ACA other circuits have weighed in, reaching opposite conclusions engendering further confusion as the FCC presently considers public comments it has received to help it wrestle with how to reinterpret ATDS in light of the D.C. Circuit’s ruling.

The TCPA defines an ATDS as “equipment which has the capacity: (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” The central controversy surrounding the definition is the meaning of the word “capacity” and whether the definition encompasses “predictive dialing,” a system which makes automated calls to a pre-loaded list of telephone numbers using algorithms to predict the best times to connect with the called parties. Because predictive dialers have come into such prolific use, whether they are an ATDS under the TCPA, and thus subject to the law’s calling restrictions and private right of action permitting class actions, is a question of enormous import to all TCPA stakeholders – sellers, call centers, consumers and, last but not least, plaintiff’s lawyers who have been feasting on an epidemic of TCPA litigation for years.

In its 2015 Order, which built upon previous orders, the FCC interpreted the statutory definition of ATDS to include dialing equipment with not only the “present” but also the “potential” (through reconfiguration) capacity to randomly or sequentially generate numbers, and dial them, even if it is not presently used for such purposes. This interpretation was broad enough to encompass predictive dialers and other technology that may have the capacity to randomly or sequentially generate numbers even though they are not presently using it but instead are using pre-loaded calling lists. By including predictive dialers, the FCC felt it was carrying out Congress’s intent to apply the definition of ATDS to new technology so that the millions of consumers who would be automatically dialed by that technology would have the protections of the TCPA against unwanted telemarketing messages.

The court rejected the FCC’s ATDS interpretation as impermissibly overbroad and incoherent. First, it said that the FCC’s interpretation of “capacity,” to include any device having the present or potential capacity to function as an autodialer, even if autodialer features are not used to make a call, was broad enough to apply to smartphones which, through app downloads and software additions, could be modified to gain ATDS functionality. An ATDS definition of such “eye-popping sweep,” which would make nearly every American a “TCPA-violator-in-waiting, if not a violator-in-fact,” was simply a bridge too far.

Second, it found the FCC’s explanation of the functions that would make a device an ATDS incoherent. As the court explained, the “basic question raised by the statutory definition is whether a device must itself have the ability to generate random or sequential telephone numbers to be dialed,” or whether it would be “enough if the device can call from a database of telephone numbers generated elsewhere.” The FCC had stated that a device qualified as an ATDS only if it could generate random or sequential numbers to be dialed, but also indicated that a device which could only dial numbers from a stored list also qualified as an ATDS. The court said that while “[i]t might be permissible for the Commission to adopt either interpretation,” it held that “the Commission cannot, consistent with reasoned decisionmaking, espouse both competing interpretations in the same order.” The court also criticized the 2015 Order for lacking clarity on whether an autodialer must dial numbers without human intervention, even though it had indicated that that was the basic characteristic of an autodialer.

Since ACA, other circuits have weighed in on the great “To Be or Not To Be” ATDS debate. The Second Circuit, in King v. Time Warner Cable (June 2018), addressed whether Time Warner Cable’s “interactive voice response” calling system was an ATDS. The court said that while there was no human involvement, for the platform to be an ATDS, it had to have the “current capacity” to perform the functions of an autodialer, i.e., the capacity to perform them whether or not they were actually in use for a call, rather than to have that ability only after modifications. The Second Circuit thus followed ACA in rejecting the FCC’s “potential capacity” interpretation of the ATDS definition, but stopped short of defining the specific functionalities that distinguish between “current” and “potential” capacity. It reversed summary judgment for the plaintiff and remanded to determine whether Time Warner Cable’s calling platform had the present capacity to function as an autodialer.

Also in June, the Third Circuit, in Dominguez v Yahoo, affirmed summary judgment for Yahoo that its email-to-text alert system was not an ATDS because it too lacked the “present capacity” to function as an autodialer and was not capable of both generating random or sequential numbers and dialing those numbers. Mirroring the Second Circuit, the court observed that “[t]he decision in ACA International has narrowed the scope of this appeal” because it found that the term “capacity” should not be interpreted to include “any latent or potential capacity” when analyzing whether a system constitutes an ATDS. The plaintiff therefore could “no longer rely on his argument that the Email SMS Service had the latent or potential capacity to function as an autodialer.” Absent record evidence that the Yahoo system had the present capacity to function as an autodialer, the court agreed with the lower court that it was not an ATDS.

Last month, in Marks v. Crunch San Diego, the Ninth Circuit, taking a broader view and a different analytical path than its sister circuits, reached an opposite result. Reversing the lower court, it held that defendant’s Textmunication system, designed to send promotional text messages to a list of stored telephone numbers, was an ATDS, even though it lacked a random or sequential number generator.

Starting from the premise that it was not bound by the FCC’s ATDS interpretations because they had been vacated in ACA, the court looked to the text of the statutory definition of ATDS itself to discern its meaning. Finding it to be ambiguous, however (with a reference to the D.C. Circuit’s dismissal of the FCC’s unreasoned “competing interpretations” of the definition as corroboration), it then sought insight in the “context and the structure of the statutory scheme” of the TCPA.

Based on this holistic look, it concluded that while Congress focused on regulating the use of equipment that dialed blocks of sequentially or randomly generated numbers—a common technology at that time of the TCPA’s enactment – “language in the statute indicates that equipment that made automatic calls from lists of recipients was also covered by the TCPA.” It pointed to provisions allowing an ATDS to call selected numbers, including one permitting use of autodialers for a call “made with the prior express consent of the called party,” and another exempting government debt collection calls made by an ATDS from the TCPA. To take advantage of these permitted uses, an autodialer would have to dial from a list of phone numbers of persons who had consented to such calls, or a list of numbers of U.S. debtors, rather than merely dialing a block of random or sequential numbers. In either case, the court said, “these provisions indicate Congress’s understanding that an ATDS was not limited to dialing wholly random or sequential blocks of numbers, but could be configured to dial a curated list.” Accordingly, it concluded that the definition of ATDS is “not limited to devices with the capacity to call numbers produced by a ‘random or sequential number generator,’ but also includes devices with the capacity to dial stored numbers automatically,” including predictive dialers.

As these post-ACA decisions (and a number at the district court level) show, the federal judiciary is not waiting for the FCC to pronounce from on high its own post-ACA declaration of what an ATDS is. The differing conclusions reached in these decisions, and the conflicting guidance they are giving to callers, are a reminder of the difficult task facing the FCC as it reviews public comment on the question and ponders its own decision. Given the confusion, it wouldn’t be surprising to see the FCC yell for help from Congress, and ask it to amend the TCPA to answer, once and for all, the “metaphysical” question of what is an ATDS.

Meanwhile, tele-sellers will have to continue to muddle through, with no reprieve from TCPA class action lawyers. As the split among the circuits after ACA shows, users of predictive dialers cannot assume they are not an ATDS, and thus exempt from the TCPA and class action risk. Until the question is finally settled, prudence might dictate that they not yet pop the champagne, but continue to act as if the TCPA still applies to their telemarketing campaigns.